The capital of Palestinian Territory is East Jerusalem

Facts about East Jerusalem

East Jerusalem is the part of Jerusalem that was captured by Israel in
the 1967 Six-Day War and remains under belligerent occupation. This
territory includes the Jerusalem Old City and some of the holiest
sites of Judaism, Christianity and Islam, including the Temple Mount
and the Church of the Holy Sepulchre.

East Jerusalem represents the eastern half of the once divided city
and became the focus of Palestinian settlement around the Old City of
Jerusalem in the period after the Second World War and Israeli
independence in 1948.

Since East Jerusalem was annexed in 1967, the government of Israels
primary goal in Jerusalem has been to create a demographic and
geographic situation that will thwart any future attempt to challenge
Israeli sovereignty over the city.

judaise East Jerusalem, expand the municipality of Jerusalem, and
maintain a Jewish majority in Jerusalem at the expense of the
Palestinian community, in violation of international humanitarian law
and human rights law (UNCHR, 12 July 1995; ICAHD, March 2007; B'tselem,
July 2006).

only if Arab East Jerusalem, which Israel occupies illegally, is
included.) The United States has never had its Embassy in Jerusalem
because Jerusalem has never been the internationally recognized
capital of Israel.

East Jerusalem is crucial to two-state solution by Ghassan Khatib
Israeli policy on Jerusalem is consistent with the current Israeli
government's reluctance to seriously entertain a two-state solution.
. Working at cross-purposes by Yossi Alpher
Obama deserves our support. Instead the prime minister of Israel
escalates tensions.

predominantly Arab neighborhood of East Jerusalem could start at any
time, Israeli officials and experts said Wednesday, as Israeli plans
for Jewish residential building in the contested territory continued
to upset peace efforts and strain ties between Israel and the United
States. Jerusalem city officials approved the...

Israel: East Jerusalem construction to continue Houston Chronicle2010-03-21
JERUSALEM - Prime Minister Benjamin Netanyahu declared Sunday that
Israel would not restrict construction in east Jerusalem, a step the
U.S.

Palestinians, who want East Jerusalem as the capital of their future
state.
The international community considers East Jerusalem occupied
territory. Building on occupied land is illegal under international
law, but Israel regards East Jerusalem - which it annexed in 1967 - as
its territory.

Palestinians in East Jerusalem, mainly the fact that most of the land
in East Jerusalem is not registered, and according to the rules
recently adopted by the Interior Ministry it is impossible to submit
an application for a building permit without the long and expensive
process of land registration (for details on the difficulties in

occupied West Bank and East Jerusalem, areas Israel captured in a 1967
war.
Netanyahu has cautioned that accepting their terms for reviving
negotiations, in the format of U.S.-mediated, indirect talks, could
put peace efforts on hold for another year.

another fiction, "Arab East Jerusalem," no correction would be made,
even though "Arab East Jerusalem" hasn’t existed for 30 years.
Between 1948 and 1967, the Jordanian army occupied the Old City of
Jerusalem and adjacent neighborhoods.